One Avantis ETF Beat Vanguard’s Biggest Funds in 2025 and Could Keep Running in 2026

Core Viewpoint - The Avantis Emerging Markets Equity ETF (AVEM) achieved a 35% return in 2025, significantly outperforming major Vanguard funds, indicating a potential resurgence for emerging markets [1][2]. Group 1: Performance and Assets - AVEM holds $15.1 billion in assets and has a concentrated investment in Asian technology and financial sectors, particularly with 6.35% allocated to Taiwan Semiconductor [1][2]. - The fund outperformed the Vanguard S&P 500 ETF (VOO) and Vanguard Total Stock Market ETF (VTI) by approximately 17 percentage points in 2025 [1][2]. Group 2: Macro Factors - A key macroeconomic factor for AVEM in 2026 is the strength of the U.S. dollar; a 9% decline in the dollar during 2025 enhanced the attractiveness of emerging market assets [4]. - Continued dollar weakness is expected to provide tailwinds for AVEM, while monitoring the Federal Reserve's rate decisions and global growth expectations is crucial [5]. Group 3: China’s Economic Influence - AVEM's performance is heavily influenced by China's economic policies, with significant investments in Chinese tech giants and banks; supportive government measures in 2025 contributed to the fund's gains [6]. - If China's support for the private sector continues or accelerates in 2026, AVEM stands to benefit, but tightening policies or geopolitical tensions could pose risks [6]. Group 4: Sector Concentration and Risks - The fund's largest holding is Taiwan Semiconductor, and its returns are significantly driven by semiconductor stocks, which performed well due to increased AI chip demand in 2025 [7]. - This concentration in semiconductors creates vulnerability; any downturn in the semiconductor cycle or supply chain disruptions could adversely affect AVEM [7].